Sub-contractors, suppliers seek extra financing to ease cash flow pressures.
United Overseas Bank (UOB) has seen a twofold increase in the number of construction firms securing loans under value chain financing (VCF) in the first six months of the year compared to end-2019, according to a press release.
The bank attributed the growth to the increase in sub-contractors and suppliers obtaining loans under VCF as part of tie-ups between their main contractors and project owners.
Financial challenges raised by the COVID-19 pandemic may have also played a role. Sub-contractors and suppliers are typically small- and medium-sized enterprises (SMEs), UOB noted.
The construction sector has been among the hardest-hit by COVID-19, with companies, particularly smaller firms, facing cash flow pressures. During the third quarter, Singapore’s construction sector contracted 44.7% YoY.
This pressure was also reportedly reflected in a UOB survey, which found that cash flow was indicated as the top challenge for almost one in two or 49% small businesses in the construction sector.
Photo courtesy of Wikimedia Commons.
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